Planning for Economic and Job Growth

Planning for Economic and Job Growth Mayors Innovation Project Winter 2012 Meeting January 21, 2012 Mary Kay Leonard Initiative for a Competitive Inner City

AGENDA The Evolving Model for Urban Economic Development Using Cluster Basted Approaches to Economic and Job Growth Why Integrate Specific Strategies for Inner Cities Source: Porter/Stern/Delgado (2010), Porter (2003) Copyright 2011 ICIC 1

Every City Requires a Specific Economic Development Strategy Define the Value Proposition What is the distinctive competitive position of the geography given its location, legacy, existing strengths, and potential strengths? What unique value as a business location? For what types of activities and clusters? Develop Unique Strengths What elements of the business environment can be unique strengths relative to peers/neighbors? What existing and emerging clusters represent local strengths? Achieve and Maintain Parity with Peers What weaknesses must be addressed to remove key constraints and achieve parity with peer locations? Economic strategy requires setting priorities and moving beyond long lists of separate recommendations Source: Porter New Hampshire Competitiveness: Creating a State Economic Strategy (August 2011) Copyright 2011 ICIC 2

Operationalizing a City Strategy Strategy is just coordinated, directional action. It has some important benefits over pure market approaches: Pooled information and shared understanding of market opportunities and challenges Alignment of objectives between and private sectors and across public sector agencies Commitment to targeting and aggregating resources to realize opportunities Source: Porter/Stern/Delgado (2010), Porter (2003) Copyright 2011 ICIC 3

Operationalizing a City Strategy Economic development is evolving. Tactical (Zero Sum Competition) Strategic (Positive Sum Competition) Focus on attracting new investments Compete for every plant / investment Offer generalized tax breaks Provide subsidies to lower / offset business costs Every city and sub-region for itself Government drives investment attraction Also support greater local investment by existing companies Reinforce areas of specialization and emerging cluster strength Provide state support for training, infrastructure, and institutions with enduring benefits Improve the efficiency of doing business Harness efficiencies and coordination across jurisdictions, especially with neighbors Government and the private sector collaborate to build cluster strength Source: Porter/Stern/Delgado (2010), Porter (2003) Copyright 2011 ICIC 4

What is a Cluster?: Example of the Food Cluster Federal Nutrition Regulation and Subsidy (WIC, School Lunches, Farm-to-School Policies, SNAP, Community Food Projects Food Safety Regulation (FDA, Food Safety Modernization Act; USDA, Food Safety and Inspection Service) Non-Agricultural Ingredients Inspections and Certifications Distribution Centers Packaging Machinery Agricultural Production Processing Wholesale Aggregators and National Independent Wholesalers Local/Regional Independent Wholesalers Terminal and Other Markets Jobbers Retail Food Services and Catering Restaurants Fish and Fish Products Distribution Local Land Conditions: Zoning, building availability, use restrictions (agriculture, processing) Local Procurement Standards (e.g., schools, hospitals, government) Foundations (e.g., support for food-related Initiatives) Source: ICIC/Karp/Next Street Food Cluster Project Copyright 2011 ICIC 6

Why Clusters Matter Clusters increase productivity Efficient access to specialized inputs, services, employees, information, institutions, training programs, and other public goods Clusters encourage new business formation Easier commercialization of new products and greater opportunities for starting new companies due to available skills, suppliers, etc. Cluster policy leverages policy investments over numerous companies Investments in training, information, export promotion, etc. will benefit many companies across a range of industries Cluster policies are less distortive than those aimed at individual firms or industries Cluster policy does not pick firm or cluster winners Build on existing and emerging clusters rather than chase hot fields Source: Porter/Stern/Delgado (2010), Porter (2003) Copyright 2011 ICIC 7

Types of Clusters Traded Clusters Local Clusters Definition Representative Clusters Compete to serve national and international markets Life sciences Transportation and logistics High wage jobs Higher productivity and innovation potential Serve almost exclusively the local market. Not directly exposed to cross-regional competition Local health services Local retail Maximum job creation Jobs that match resident skills Relative Productivity 144.1 79.3 National Annual Wage (2009) $56,900 $37,280 National Wage Growth (1998 2009) 9.8% 6.2% Patents (per 10,000 employees) 23.0 0.4 Share of National Employment (2009) 27% 72% Share of Inner City Employment (2009) 26% 74% National Employment Growth (1998-2009) -3.5% +11.4% Inner City Employment Growth (1998-2009) -9.6% +0.4% Source: State of the Inner City Economies (SICE) Database, ICIC analysis, Porter (2010) Copyright 2011 ICIC 8

Local Cluster Job Accessibility Local Cluster Average Wages Local Utilities Local Financial Services Local Commercial Services Local Industrial Products and Local Real Estate Local Health Services National Average Average Local Cluster Wage Local Logistical Services Local Household Goods and Services Local Motor Vehicle Products and Local Entertainment and Media Local Food and Beverage Local Education and Training Local Community and Civic Orgs Local Personal Services Local Retail Clothing Local Hospitality Source: SICE; BLS; ICIC Analysis. $67 $56 $50 $50 $46 $46 $43 $37 $36 $31 $31 $30 $27 $27 $24 $20 $19 $14 $0 $20 $40 $60 Average Annual Wage, 2009 ($k) % of Workers Educational Requirements by Cluster Type 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 29% 23% College or Higher 32% Some College 30% 41% 45% High School or Less Traded Clusters Local Clusters Copyright 2011 ICIC 9

Aligning Economic Policy and Clusters Business Attraction and Retention Education and Workforce Training Export Promotion Science & Technology Investments (e.g., Centers, University Departments) Clusters Land Use and Zoning Standard Setting / Certification Organizations Specialized Physical Infrastructure Environmental Improvement Clusters provide a framework for organizing the implementation of many public policies and public investments to achieve greater effectiveness Source: Porter (2008) Copyright 2011 ICIC 10

Example: Developing A Strategy for Detroit WHAT/HOW? BENCHMARKING THE ECONOMY To understand the economic performance of Detroit and the larger region, we: 1.Compiled industry- and cluster-level employment data for the 100 largest U.S. cities and their 83 regions 2.Benchmarked Detroit s cluster performance against other U.S. cities and regions 3.Performed ~100 interviews with firms, business groups, capital providers and intermediaries, cluster experts, and city and state personnel 4.Based on these analyses, we have identified 12 clusters that will drive Detroit s growth and are targeting 7 for cluster strategies IDENTIFYING LAND ASSETS To catalogue the usage and availability of the city s industrial land, we: 1.Surveyed 95% of the city s industrial land tracts noting occupancy, level of usage, and site characteristics 2.Merged these data with site-specific information from the city and private data sources to estimate site size, building size, industry, and employment 3.Performed a quality check on the initial industrial database by visiting and contacting hundreds of individual firms TARGET SELECTION/ CLUSTER STRATEGIES To develop target clusters and strategies for cluster growth in the city of Detroit, we: 1. Identified those clusters that will drive the city s job growth performance in the future 2. Identified a subset of clusters with the greatest potential for employing Detroit residents 3. Will identify the current land usage and future land needs of these clusters 4. Will develop cluster strategies that identify growth opportunities within each cluster, structural barriers to growth, and potential remedies. 5. DEGC and other local leaders will convene cluster working groups to determine organizational structures for coordinating cluster activity. Copyright 2011 ICIC 11

Example: Operationalizing Detroit s Strategy How DEGC Organizes for Cluster Focused Development Staff Organization Financing Retention vs. Attraction Traditional Capital Sources Cluster Specialization New Tools Tailored to Project Needs Incentives By-right Incentives Gap-filling Incentives Growth Accelerators Talent Old Model Employer-based Incentives Workforce Silos New Model Talent Pipelines Integrated with Employer Needs Retention/expansion strategies for five clusters Attraction strategies for three clusters New partnerships from the state to region to neighborhood levels MEDC Talent Team Workforce Innovation Network Earn and Learn Neighborhood Jobs Pipeline Land Liability Asset, Tool for Equity Copyright 2011 ICIC 12

Inner Cities and Poverty 0.1% of U.S. land area 8% of U.S. population 19% of U.S. poverty 31% of U.S. minority poverty Poverty, especially minority poverty is concentrated in inner cities Definition of Inner City Contiguous census tracts in central cities that are economically distressed, as defined by having: Poverty rate 20% or higher Or Two of three other criteria Poverty rate 1.5 times or more than the MSA Median household income 50% or less than the MSA Unemployment rate 1.5 times or more than the MSA Source: U.S. Census 2000, ICIC analysis Copyright 2011 ICIC 14

Inner Cities and Employment Growth 100 Largest Inner Cities vs. Rest of U.S. (1998-2009) Job Growth (1998 = 100) 115 110 Inner Cities Rest of Central City Rest of U.S. Net Job Growth 1998-2009 Number Percentage Rest of U.S. +5,900,000 7.2% 105 100 95 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 Rest of Central City +700,000 4.2% Inner City -300,000-3.3% Inner cities have experienced a net job loss over the past decade Source: State of the Inner City Economy Database (SICE) Database, ICIC analysis Copyright 2011 ICIC 15

Why Inner City Jobs Matter Inner City Residents Hold: 22% of jobs in the inner city 11% of jobs in rest of the central city 7% of jobs in the rest of the region Creating 100 New Jobs for Inner City Residents Would Require: 450 inner city jobs 850 jobs in the rest of the central city 1,450 jobs in the rest of the region Jobs anywhere are not enough. Often inner city residents cannot access jobs in the rest of the region Inner city-based firms hire disproportionally more inner city residents Source: U.S. Census Special Tabulation; ICIC analysis Copyright 2011 ICIC 16

Conclusion Every city requires a specific economic development strategy These strategies are evolving to: Focus on strong and emerging clusters Align with neighboring jurisdictions Incorporate all public levers Build on public/private collaboration These strategies require new organizational structures These strategies need a specific focus on the city s most distressed areas Copyright 2011 ICIC 17